For Tavis Smith, the realization that Portland's housing market has tipped in sellers' favor came the day he and his wife wrote their first bid on a house that had been on the market for two months -- and found out two other bids came in that same day. They've put in two more offers since, and lost in both. In one case, they increased their initial offer by $10,000, but still fell short of other bidders.

"It should be a good market to buy a home," Smith said, "but it's still very difficult."

Indeed, home prices in the Portland area have fallen by nearly one-third since their 2007 peak, and mortgage rates are at an all-time low. Prices appear to be stabilizing, so buyers are less concerned about their new purchase immediately eroding in value.

Tips for home buyers and sellers in a competitive housing market.

But while the number of monthly home sales has climbed 16 percent in the past year, the number of homes listed for sale has fallen 26 percent. The result is buyers fighting over a slim inventory, constraining sales and driving up prices.

The bidding wars started in Portland's urban core, but the tight market has spread to the suburbs.

A year ago, as prices continued their decline, there was a 6.8-month supply across the metro area. In January of last year – a seasonally slow sales month – the supply was 11.3 months.

But by May of this year, the supply of listed homes across the metro area would sell in 4.8 months. Six months is generally considered a balanced market, with anything less reflecting a market where demand outpaces supply.

Lindsay Putnam wrote her first offer on a house in February. By this week, she had written seven, including one that was $13,000 above the list price. "When I lost that house, I was shocked," she said. "I thought it was in the bag. Who offers $13,000 over asking in a recession?"

When Adrienne Newman put her Southeast Portland home on the market on a Wednesday in May, she had four offers by the end of the week. Particularly on brand-new listings, buyers have to make a decision virtually on the spot.

"You don't get to call your folks or think on it overnight," said Nick Krautter of Keller Williams Realty, Newman's broker. "You have to move now. There's definitely a sense of urgency that's back in the market."

Stronger sales and higher prices should eventually bring sellers back to the market, said Tim Duy, a University of Oregon economist. But they are a little slower to react to the switch turned from a buyer's market to a seller's market.

"People had been there so long, they're shocked," he said. "We knew eventually what's going to happen is prices will drop to a point where it's attractive to buy. It just took a lot longer than I think many people anticipated."

And some will continue to wait, hoping for prices to move higher. But prices aren't expected to rebound quickly.

Short sales and foreclosure sales, though often less attractive to traditional buyers, continue to hold prices back. Those buyers willing to consider foreclosure sales typically have to compete with cash buyers.

Meanwhile, lending standards remain strict. Freddie Mac says the average credit score for mortgages backed by the government-sponsored loan giant has risen from 704 in 2007 to 758 this year, while the loan-to-value ratio – the portion of purchase price financed – has declined. That means bigger down payments, which reduces buying power and puts pressure on price growth.

Homebuilders, having largely worked through their pre-recession overbuilt inventory, have forecast growing demand. The number of new home permits issued in the Portland area this year will likely top any year since 2008. Those new homes will come to market at a higher price point -- new homes typically sell at a premium by virtue of being new -- but will increase the supply, putting downward pressure on home prices.

But the existing home inventory will be limited for a while. Some 30 percent of homeowners are locked out of the market because they are underwater on their existing mortgage -- that is, they owe more than the house is worth. That tends to limit turnover, because underwater owners are less likely to sell and buy another place.

So the limiting factor in home-sales numbers will -- for the first time in a long time -- continue to be the number of homes available, not the market's appetite for them.